IFRS with Oracle - What standard and solutions impact the most?
Introduction of new regulations or changes in existing regulations at local or international level can lead to drastic changes for an enterprise. IFRS is one such change which would change the financial statements for ever. US markets would also be affected starting 2013 though SEC is yet to make any decisions on the start date as to when to adopt IFRS.
The key IFRS differences which would have big impact on US companies are:
1. Consolidation, Associates and Joint Ventures
2. Property Plant and Equipment
3. Employee Retirement Benefits
4. Borrowing Costs
5. Inventory valuation
Though oracle claims that it is ready for IFRS with multiple solution options like Sub ledger accounting, Oracle General Ledger or Hyperion Financial Management, some key solutions would have to be worked as per the client situation. The most complex solutions to design would be Fixed Assets and Inventories since these solutions would have sub ledger level impact
No ERP package provides an out of box solution to immediately converge to IFRS especially at sub ledger level. However let's look at some of the features of Oracle R12 which can be used at sub ledger level to achieve asset componentization and thereby comply with IFRS standard on Property plant and Equipment
FOr Propery Plan and Equipment, as per IFRS every asset need to be componentized based on its useful life and residual value. Hence in the current state For eg: an aircraft would have to be broken into Engine, Body, Seating arrangements etc to be capitalized separately. Following features of Oracle Fixed Asset subledger would be useful to converge to IFRS
a) Asset Tax book which can now post to a secondary ledger in R12 to calculate differences as per IFRS while converging to IFRS
b) Parent child asset feature to group assets after componentization
c) WEB ADI to download, make changes and upload the assets
d) Group asset feature to group assets of same class
e) Unplanned depreciation
f) Out of box Asset Impairment functionality
Infosys provides an out of box PPE (Property Plant and Equipment) convergence solution to be IFRS compliant using the above functionalities of Oracle. Infosys has been closely following IFRS and has established an IFRS center of excellence for its clients to provide proof of concepts and demos. We invite your comments and suggestions if any on this blog to handle specific client situations for PPE.